Santo Domingo, February 19, 2014 – A new World Bank report released today, suggests major institutional reforms in the Dominican Republic (DR) as a way forward for accelerating poverty reduction and shared prosperity in the country.
While having one of the fastest growth rates in Latin America and the Caribbean (LAC) region, above five percent per year from 2000 to 2011, many of the 10 million Dominicans missed out on the benefits of economic development, the reports says.
The report, “When Prosperity Is not Shared,” highlights that GDP per capita rose 50 percent as opposed to a 26 percent increase in LAC in the last decade. Yet, only two percent of Dominicans escaped poverty compared to the 40 percent of poor Latin Americans, close to 80 million.
“While poverty has fallen since the 2003-2004 banking crisis, four out of ten Dominicans are still poor and the middle class has not grown significantly in a decade,” said Louise Cord, World Bank Sector Manager of the Poverty Reduction and Gender Group in the Latin America and Caribbean Region. "The report aims at promoting a debate on equity issues and identifies priority areas for action that can generate opportunities for all Dominicans."
With the financial crisis, the Dominican population living on about four dollars a day had soared to 50 percent. Though poverty has fallen by 10 percent since 2005, the ability of poor Dominican families to improve their economic and social status over time remains limited compared to the rest of the region.
The report also finds that the number of poor has doubled in cities, rising from 1.2 to. 2.4 million since 2000. This “urbanization” of poverty is not explained by rural poor migrating to big cities, but more by the limited economic opportunities and the slow growth in jobs in urban areas.
Access to health, education and housing, have improved significantly over the past decade. Only 19 percent of Dominicans lack these basic services. Still, quality of services is not strong enough to provide equal opportunities for all Dominicans.
Despite some progress in accessing education, coverage and quality remain limited. While there has been substantial increase in school enrollment, teacher absenteeism, double shifts, and high teacher pupil ratios are affecting children’s education and poor students in particular. More than 40 percent of third graders lack basic math skills and students in the Dominican Republic show some of the lowest academic performance in the region.
The report suggests three strategies to generate a positive cycle of shared prosperity and to close the gaps with the rest of the region:
- Improving the investment climate to boost entrepreneurship and jobs creation while strengthening access of the poor to labor markets: Growing sectors such as tourism, manufacturing, telecommunication and financial services have not generated as many jobs as envisaged initially. Instead most of the job created has been low skilled jobs in the informal sector. Real wages declined by 27 percent in the last ten years, even as labor productivity rose. Improving competition policy and the investment climate would generate more and better jobs.
- Promote equitable, efficient and sustainable fiscal policy: The current tax system is hampered by low revenue collection, and relies heavily on indirect taxes. Making the tax system more progressive would allow more redistribution, as well as more investments in essential public services such as water and sanitation, quality education and health for the most vulnerable.
Improve public service delivery to reach the poor: Despite significant improvements in service delivery, access to basic public services remains unequal and of low quality, particularly for the poor. Better program targeting, monitoring and evaluation, along with incentives such as performance-based budgeting could help improve service delivery.
The report concludes that a broad consensus in Dominican society is growing which allows moving forward on the right set of reforms, so the country can take the road to a more inclusive growth and promote opportunities for all Dominicans.